Investor Presentation. ASX: SGM USOTC: SMSMY

Transcription

1 Investor Presentation ASX: SGM USOTC: SMSMY

2 Business Highlights Company Global leader in metals and electronics recycling with $4.7 billion in annual sales revenue Operations in 20 countries with balanced sales mix across ferrous and non-ferrous metals Best in class people, technology, trading, and logistics Strategy & Strengths Ability to maintain healthy metal margins through the cycle and improve cost flexibility Internal initiatives to improve return on capital from 5.5% to at least 10% by FY18 Net cash position, providing balance sheet strength, dividends, and ongoing share buyback program 2

3 Strong core metals recycling business and diversification through electronics recycling Metals Recycling 8.6m tonnes of secondary metals sales in FY16 Sales Revenue By Business (FY16) ~200 facilities with operations in 6 countries Export capabilities across North America, UK and Australasia, with 13 deep water ports globally Global market leader 17% 2% Electronics Recycling 600,000 tonnes of electronics recycled annually 81% ~30 facilities across 16 countries Emerging opportunities in IT asset management and engineering solutions Development of innovative recycling technology useful to both electronics and metals recycling businesses Metals Recycling Electronics Recycling Other 3

4 Best in class assets and operations 28 high-powered metal shredders across 5 countries Best-in-class non-ferrous metals separation technology Dedicated engineering teams Industry leading metal-yield and waste reduction methods 4

5 Balanced sales mix Ferrous Metals Heavy Melt Steel Bundles & Bales Sales Revenue By Product (FY16) Shredded Steel Non-Ferrous Shred Recovery Plate & Structural 17% 2% Zorba (aluminium based) Zurik (stainless steel based) Non-Ferrous Metals Aluminium Lead Copper Nickel 23% 52% Zinc Electronics Recycling Precious Metals Shredded Circuit Boards Municipal Recycling Plastics Metals Used Beverage Cans Copper IT Asset Management Paper Glass 6% Ferrous metals recycling Non-ferrous shred recovery Non-ferrous metals recycling Electronics recycling Secondary processing and other services 5

6 Diverse supply base Post Industrial % Key Supplier Groups Stampings & clippings 12-14% Borings & turnings 3-5% Other 1-3% 6% 6% Total ~20% 10% Obsolete Material % 45% Construction & demolition 20-30% 12% Passenger vehicles 15-25% Major appliances 5-10% Other light iron 5-10% Stainless steel 3-5% Other 15-20% Total ~80% 21% Dealers (material aggregators) Industrial manufacturing Auto wreckers Peddlers C&D contractors Other Source: USGS, EPA, Polk, Sims Metal Management Source: North America Metals 6

7 Global trade network with customers in 60 countries Sales to external customers United States 23% Turkey 15% China 12% Australia 6% United Kingdom 4% Taiwan 4% South Korea 4% Export Domestic Operations Global Trading Offices Export destinations 7

8 Positioned of benefit in export or domestic markets US$ / metric tonne Export vs Domestic Price Premium Export Premium US Domestic Premium Export Advantages Exporting from the US, UK & Australasia, with 13 deep water ports globally 15 global trading offices across 5 continents, trading to 60 countries ~10% market share of global trade Domestic Advantages Market leader across the largest cities in the US: New York, LA, and Chicago Low cost domestic freight channels through rail and barge assets US East Coast Export HMS vs US Midwest HMS (Source: AMM) 8

9 5 year strategic target to deliver at least 10% return on capital by FY18 Grow Streamline Exit non-strategic businesses Reduce non-essential costs Return on Capital 2% in FY13 Optimise Strengthen supplier relationships Exploit local & global logistics Operational excellence through shared best practices Lead on product quality & service Return on Capital 5.5% in 2H FY16 Market share growth through organic investment and patient selective acquisitions Leverage emerging technologies in e-recycling across metals recycling operations Target Return on Capital >10% by FY18 9

10 Internal initiatives to Optimise key profit drivers for stronger earnings through the cycle Key Profit Drivers Raw Material Availability Supplier Relationships Product Quality & Service Logistics Operational Excellence Raw Material Availability Leading market position in large urban centers to retain and grow volumes Supplier Relationships Strengthening supplier networks to grow volumes and market share Logistics Improving inbound & outbound transport capabilities to lower freight expense Operational Excellence Drive continuous improvement to lower operational expenses Improve processing yields on nonferrous and grow metal spreads Product Quality & Service Lead on product quality to grow metal spreads and market share 10

11 Volume break-even lowered with upside leverage retained when volumes recover Sales volumes (million tonnes) Significant reduction in volume break-even point Majority of processing capacity retained for volume recovery Internal initiatives have reduced the volume break-even point by 34% Despite cost reductions, majority of processing capacity has been retained Installed capacity could process 40% more volume, with limited impact on fixed costs 0 FY13 FY14 FY15 FY16 2H FY18 (target) Break-even EBIT volume point Volume capacity (relative to FY13 market conditions) 11

12 Substantial pipeline of internal initiatives over FY17-FY18 Streamline Initiatives FY17 - Sale of assets in Mississippi and Tennessee (complete) - Sale of FE Mottram (complete) - Closure of Chicago Stainless (complete) - E-Recycling US restructure (in progress) EBIT (A$m) $20 to $25 million - FY18 Optimise Initiatives - MRP installation in Kwinana - Chicago rail connection - Claremont terminal dredging - Zorba de-commoditisation pilot - Overhead cost redesign - MRP upgrade in New Jersey - MRP installation in Chicago - Municipal recycling expansion - Avonmouth, UK site upgrade EBIT (A$m) $20 to $25 million $50 to $70 million Total Initiatives $40 to $50 million $50 to $70 million 1. Return on Capital (ROC) = (EBIT tax) / (Net Assets + Net Debt) 12

13 Strong net cash supports reinvestment into business, while continuing to return capital to shareholders Cash Management Preservation of cash for future working capital requirements Capital Expenditure FY17F capex $ million Sustaining Capex Expansion Capex Ongoing maintenance, safety and Environmental Technology and equipment NFSR plant upgrade in New Jersey NFSR plant installations in Kwinana & Chicago Zorba recovery initiatives A$ million Capital Management 22 cents in dividends for FY million shares repurchased, with buyback ongoing

14 Summary Global leader in metals and electronics recycling Lifting through the cycle earnings by lower costs and higher metal margins On track to deliver at least 10% return on capital by FY18 Significant net cash position, providing balance sheet strength and capital management flexibility FY17 return on capital is expected to improve further, based on internal initiatives, even at current market conditions The Company is well positioned to benefit from volume improvement due to the significantly reduced cost base, lower volume break-even point, and available global processing capacity 14

15 Appendix ASX: SGM USOTC: SMSMY

16 Diverse ferrous and non-ferrous product portfolio Ferrous Non Ferrous Electronics Recycling Heavy Melt Steel (HMS) Copper Circuit Boards Shredded Steel Zorba (Shredded Aluminum) End of life IT assets Note: The above images include only a selection of product types sold 16

17 The Metals Recycling Process Post Industrial Factory stampings, clippings, turnings, and borings Obsolete Goods Vehicles, appliances, construction & demolition, railroads, steel cans Weighing, Inspection, & Sorting Non Ferrous Copper, Aluminum, Zinc, Lead, Nickel Processing Sort, Shear, or Bale Sales to Steel Mills Export & Domestic Ferrous Steel Processing Shear, Bale, or Shred Shearing Sales to Smelters Export & Domestic Baling Ferrous Recovery Shredding Non Ferrous Recovery 17

18 The Electronics Recycling Process 18

19 Metals Recycling Global Footprint Europe Metals North America Metals Australia & New Zealand Metals Australia New Zealand Metal Shredder / Key Metals Recycling facility Metal Shredder (50% JV owned) 19

20 Electronics Recycling Global Footprint Europe, Africa, and Middle East UAE North America United States Europe South Africa India Singapore Asia Pacific Australia New Zealand Electronics Recycling facility 20

21 Financial Summary - Group A$m FY10 FY11 FY12 FY13 FY14 FY15 FY16 Group Results Sales Revenue 7,453 8,847 9,036 7,193 7,129 6,311 4,652 Underlying EBITDA Underlying EBIT Underlying NPAT Underlying EPS (cents) Dividend (cents) Balance Sheet Total Assets 4,233 4,167 3,509 2,917 2,649 2,882 2,571 Total Liabilities 959 1,256 1, Total Equity 3,274 2,912 2,284 1,929 1,834 2,113 1,833 Net Cash (Net Debt) Cash Flows Operating Cash Flow Capital Expenditure Free Cash Flow NOPAT Total Capital 3,259 3,038 2,576 2,083 1,792 1,799 1,590 ROC 2 (%) 5.0% 6.5% 3.3% 2.3% 4.6% 5.5% 2.6% 1) Underlying earnings from continuing operations; excludes significant non-recurring items and earnings from discontinued businesses 2) Return on Capital = Underlying NOPAT / (BV of Equity + Net Debt) 21

22 Financial Summary Segment A$m FY10 FY11 FY12 FY13 FY14 FY15 FY16 Sales Revenue North America Metals 4,834 5,782 5,773 4,256 3,996 3,417 2,353 ANZ Metals 1,126 1,300 1,190 1,047 1,188 1, Europe Metals , ,063 1, Global E-Recycling Unallocated Total 7,453 8,847 9,036 7,193 7,129 6,311 4,652 Underlying EBITDA North America Metals ANZ Metals Europe Metals Global E-Recycling Unallocated Total Underlying EBITDA Margin (%) North America Metals 3.8% 3.0% 0.9% 2.2% 1.9% 2.4% 3.2% ANZ Metals 7.4% 8.2% 6.7% 6.9% 9.0% 8.3% 9.0% Europe Metals 3.2% 2.9% 1.4% -0.2% 2.7% 3.6% 4.3% Global E-Recycling 14.0% 14.9% 9.4% 2.6% 2.3% 6.9% 2.4% Total 5.1% 4.7% 2.8% 2.7% 3.4% 4.2% 4.2% 1) Underlying earnings from continuing operations; excludes significant non-recurring items and earnings from discontinued businesses 22

23 Financial Summary Segment (cont.) A$m FY10 FY11 FY12 FY13 FY14 FY15 FY16 Sales tonnes ( 000) North America Metals 9,906 10,964 11,080 9,377 8,152 7,018 5,772 ANZ Metals 1,578 1,764 1,765 1,764 2,054 1,874 1,418 Europe Metals 1,394 1,466 1,651 1,645 1,609 1,589 1,361 Total 12,878 14,194 14,496 12,786 11,815 10,481 8,551 Underlying EBIT North America Metals ANZ Metals Europe Metals Total EBIT / tonne (A$/t) North America Metals ANZ Metals Europe Metals Total

24 Financial Summary Segment (cont.) A$m FY10 FY11 FY12 FY13 FY14 FY15 FY16 Sales tonnes ( 000) Ferrous Trading 9,068 10,115 10,320 9,396 9,331 8,325 6,767 Ferrous Brokerage 3,264 3,518 3,597 2,840 1,918 1,617 1,307 Non Ferrous Total 12,897 14,204 14,503 12,786 11,815 10,481 8,551 Sales Revenue Ferrous Metals 5,071 6,144 6,259 4,817 4,801 4,068 2,703 Non Ferrous Metals 1,526 1,724 1,657 1,353 1,361 1,342 1,055 Global E-Recycling Secondary processing & other Total 7,453 8,847 9,036 7,193 7,129 6,311 4,562 1) Underlying earnings from continuing operations; excludes significant non-recurring items and earnings from discontinued businesses 24

25 Disclaimer The material contained in this document is a presentation of information about the Group s activities current at the date of the presentation. It is provided in summary form and does not purport to be complete. It should be read in conjunction with the Group s periodic reporting and other announcements lodged with the Australian Securities Exchange (ASX). To the extent that this document may contain forward-looking statements, such statements are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed in the statements contained in this release. This document is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. 25